Daily Quiz #61 UPSC Prelims Marathon – January 14, 2020

Explanation: Main functions/powers of the Board as per the SEBI Act, 1992 are:
(i) Registering and stock exchanges, merchant banks, mutual funds, underwriters, registrars to the issues, brokers, sub-brokers, transfer agents and others.
(ii) Levying various fees and other charges (as 1 per cent of the issue amount of every company issuing shares is kept by it as caution money in the concerned stock exchange where the company is enlisted).
(iii) Promoting investor education.
(iv) Inspection and audit of stock exchanges and various intermediaries.

Explanation: An IDR is a mechanism that allows investors in India to invest in listed foreign companies, including multinational companies, in Indian rupees. IDRs give the holder the opportunity to hold an interest in equity shares in an overseas company. IDRs are denominated in Indian Rupees and issued by a Domestic Depository in India. They can be listed on any Indian stock exchange. Anybody who can invest in an IPO (Initial Public Offer) is/are eligible to invest in IDRs. In other words, what ADRs/GDRs are for investors abroad with respect to Indian companies, IDRs are for Indian investors with respect to foreign companies.

Explanation: An apex level body, the FSDC, was set up by the GoI in December 2010. It was in line with the G-20 initiative which came in wake of the financial crises among the western economies triggered by the 2007–08 ‘sub-prime’ crisis of the USA. The Council has the following objectives:
(i) To strengthen and institutionalise the mechanism for maintaining financial stability,
(ii) To enhance inter-regulatory coordination, and
(iii) To promote financial-sector development.
The council is chaired by the Finance Minister and has heads of financial sector regulatory authorities, the Finance Secretary and/or Secretary of the Department of Economic Affairs, Secretary of the Department of Financial Services, and the Chief Economic Adviser as members.

Explanation: Repos and Reverse Repos: In the era of economic reforms there developed two new instruments of money market-repo and reverse repo. Considered the most dynamic instruments of the Indian money market they have emerged the most favored route to raise short-term funds in India. ‘Repo’ is basically an acronym of the rate of repurchase. The RBI in a span of four years, introduced these instruments-repo in December 1992 and reverse repo in November 1996. Repo allows the banks and other financial institutions to borrow money from the RBI for short-term (by selling government securities to the RBI). In reverse repo, the banks and financial institutions purchase government securities from the RBI (basically here the RBI is borrowing from the banks and the financial institutions). All government securities are dated and the interest for the repo or reverse repo transactions is announced by the RBI from time to time. The provision of repo and the reverse repo have been able to serve the liquidity evenness in the economy as the banks are able to get the required amount of funds out of it, and they can park surplus idle funds through it. These instruments have emerged as important tools in the management of the monetary and credit policy in recent years.

Explanation: The special economic zone (SEZ) policy was announced by the government in 2000 which was concretized through the SEZ Act, 2005. It mainly aims to develop ‘export hubs’ in the country to promote growth and development. As an idea it was not new—India had set up Asia’s first ‘export processing zone’ (EPZ) in Kandla in 1965 itself. Later on the idea got another encouragement through the ‘export oriented units’ (EOUs). After the SEZ policy was formalized through an Act, the EOUs and EPZs are open to conversion to SEZ.